Seeking Alpha

jstratt

jstratt
Send Message
View as an RSS Feed
View jstratt's Comments BY TICKER:
Latest  |  Highest rated
  • The Only Metric That Really Matters For Long-Term Bank Of America Shareholders [View article]
    Thanks for a good article!

    I am long BAC and think it will go up over the next year.

    That said, my guess is as 10 year yields drop around the world and bank margins are compressed, you might find an entry point below the current price.
    Aug 17 11:45 PM | 1 Like Like |Link to Comment
  • Retirement Strategy: How Dividend Income Grows To Staggering Levels By Reinvesting And Compounding [View article]
    If you use the model described by the author you better plan to work longer instead of retiring! Lets see what he is missing!

    T - great company that has grown at 3% for the past 5 years. It has been borrowing heavily to give you that 5% dividend. So yes historically it has grown earnings more rapidly and the dividend grew with it. Looking at the financial statements I would say you are getting a 3.2% dividend and a 2% return of capital. Dont expect that rapid dividend growth.

    KO - I love KO and what it has done for me in the past. Again it has actually had a decrease in profits for the past couple years. So where does that rapid dividend growth come from? My guess is 2% growth in dividends.

    PG - The money PG has made is great I hate to criticize it. However the 1.3% growth in profits the past 5 years is going to generate how much future dividend growth. Plug 1.3 into your formula for dividend growth that sounds about right to me.

    GE - I dont dislike GE as it has better forward prospects but the dividend decline has been substantial

    MCD - since MCD has declining profits what kind of a dividend growth rate are you going to put in? My expectation is for a zero growth rate

    WMT - at least their past 5 year growth rate is higher than the number of fingers on my hand. I am suspicious of predicting a growth rate higher than 2% for the next 5 years. My expectation for dividend growth would be zero.

    PFE - with a past 5 year growth rate of 1.3% and a forward expected growth rate of 3.1% good luck with that. My expectation would be for more patent expirations and declining earnings since they already cut most of their research staff.

    My problem with this strategy is that it is the one I followed in the 1980s and 1990s when these companies had 10%+ growth rates. It worked well in those days.

    I wish I could close my eyes and see what the author sees. What I see are the worst candidates for earnings or dividend growth in the future. Historically once companies stop growing they tend to drop off of the Dividend Champion list and are even subject to dividend cuts.

    I own small amounts of several of the above stocks but largely had to move away from them. How is it you expect a stagnant company to provide good returns?
    Aug 17 11:22 PM | Likes Like |Link to Comment
  • Build A 'Whatever Happens' Portfolio... Now [View article]
    I would point out that I did not state to blindly buy and hold.

    As an example in late summer 2007 after 6 months of hearing about a financial crisis and the scope getting deeper I sold all of my financials including C at $50+, BAC at $50+, 50% of GE at 40+ and others. So I dont advocate buy and hold. I did stay invested however in other sectors.

    In 2008 I reduced other higher risk holdings and invested in T/VZ with a 6.8% return as an example. Investors cant sit like a bump on a log but they can evaluate risk carefully and if they have a proper cash position they can shave off a lot of the pain.

    I have been through about 5 bear markets and I am sure I will be around for more. By staying invested I have captured the entire upside and I retired at 55 in 2012.

    So again weigh your risks carefully in good and bad times. The S&P was below 100 when I graduated from college and staying invested has helped me capture most of the 20x increase in 35 years.
    Aug 17 10:13 PM | 2 Likes Like |Link to Comment
  • Why Gilead Is The Most Exciting Growth Opportunity In 2014 [View article]
    Another reason why I invested in GILD in a portfolio context.

    I demand some growth in my portfolio and like to have it at the lowest risk possible.

    So when I look at 10 Year Treasuries around the world and many at 200-400 yr lows that is a strong signal that growth may be hard to find. I am not predicting that just saying that is what one very important indicator points at.

    So look at some of my favorite growth stocks like HON, DIS, FDX, ADP, GOOG, PANW. Should a reduction of growth occur most growth companies would be hit and multiples decline. To get growth we take more risk is a given.

    GILD has a good measure of risk as well, but not economic slowdown risk. The Sovaldi cure for Hep C is not going to be influenced by the economy. That makes the relative risk of GILD less than other growth alternatives.

    What I am saying is goods, services and advertizing get hit across the board in a economic slowdown and multiples with them. Life saving cures might be in a class by themselves!
    Aug 16 12:48 PM | 6 Likes Like |Link to Comment
  • The Spanish Renaissance [View article]
    Several Euro countries are in the 200-400 year lows on a 10 year Treasury yield. Japan as well.

    I dont know much about the European economy but that data suggests a couple of things.

    1) deflation/recession

    2) a negative impact on US growth

    3) further drops in the US 10 year Treasury

    4) refinance of my rental house ahead
    Aug 16 12:29 PM | Likes Like |Link to Comment
  • The Same Returns With Half The Risk? [View article]
    Thanks for the article!

    I like the concept but I prefer a good old cash allocation rather than dumbing down a portfolio that already balances risk vs reward.
    Aug 16 12:18 PM | Likes Like |Link to Comment
  • Build A 'Whatever Happens' Portfolio... Now [View article]
    My comment on that portfolio

    I think you make it way too complex and full of things that eliminate the opportunity to get much return. With that portfolio your advisor fee of 1%+ might be 50% of the expected return.

    How about a more simple and understandable approach for the risk averse that includes

    - A proper cash allocation to get through 2 years without having to sell stocks
    - Quality dividend stocks, reinvest the dividends and benefit should the market drop. ( VZ, JNJ, HON, GE, PG, JPM)
    - a few but very few bonds
    - some RE or REIT exposure ( I manage some mid level rental homes)
    - some primarily Euro international stock exposure
    - careful reaching for yield but a Ferrell Gas at 7.4% yield has worked for decades
    - view your entire financial picture and consider delaying SS for a guaranteed 8% annual increase in benefits if single, or if married get advise.
    - if you can take addl risk consider more growth ( DIS, FDX, GILD)
    - make sure you understand what you have and the risk you have to live with
    - A company with strong FCF can cure a lot of evils

    The S&P was below 100 and has gone up 20 times since I graduated from college in 1979. Being smart enough to stay invested has worked well. Trying to buy a mish mashed, hodge podge of discombobulated goop that is designed to keep an investor from losing also keeps an investor from gaining.
    Aug 16 11:54 AM | 7 Likes Like |Link to Comment
  • 2 Stocks With Million Dollar Insider Purchases In 2014 [View article]
    One investors view of LLY

    Earnings growth over the past 5 years was -7.95% and is projected by analysts to be 1.27% over the next 5 years.

    The PE is 17 and forward PE is 19.38.

    I realize LLY could have a big hit or get bought out but really I have to view it as looking at as a history of the pharmaceutical business. Not only would I be buying decline but I would appear to be over paying for it.

    Contrast that with JNJ which methodically increases its value at a double digit rate at a PE not substantially higher.

    Then I could consider GILD which has introduced the 1st cure for a major disease in my lifetime and one with 150MM afflicted and exploding sales. I am talking about Hep C and Sovaldi.

    Id probably drink battery acid before I would choose LLY!
    Aug 16 10:49 AM | Likes Like |Link to Comment
  • 2 Key Tests For The True Dividend Growth Investor [View article]
    Packer Man

    If that worked untold additional investors would be millionaires. Historically the failure rate on that one is 90%.

    When I got out of college in 1979 the S&P was just under 100 and the S&P is up about 20x. By staying invested I have gotten all of it and more. It allowed me to retire at 55 a couple years ago.

    Truth is volatility helps separate the investing Wheat from the chaff. It is much like the Farmer who sells his farm or businessman who sells his business, most will never again own as substantial an asset.
    Aug 16 09:56 AM | Likes Like |Link to Comment
  • Big Problems Within Procter & Gamble's Long-Term Future [View article]

    I will offer a few points to consider as a long time PG shareholder. For the record I used to have a large position in PG and now a much smaller position as other growth opportunities have emerged.

    Historically PG was magical with 10%+ returns for decades and little volatility. After Lafley retired the first time a poor CEO seemed to stop investing in products and low revenue/earnings growth ensued (stagnancy).

    I really dont understand a 21.80 PE but I would add that PG has low risk and in 2008-9 fell perhaps a max of 20% when the market was more than cut in half. Really PG is a low risk stock trading as a bond with a 3.2% yield.

    Poor CEOs happen and over the past 10 years an investment in PG still more than doubled returning 219%. I do still believe PG can return their projected 8.72% annual 5 year expectation.

    A company with strong FCF has the wind at their back. Lafley who has returned is a smart leader and PG will grow again but not like in its heyday. If we get a correction it will also shine while providing a dividend.

    Aug 16 09:34 AM | Likes Like |Link to Comment
  • Why Gilead Is The Most Exciting Growth Opportunity In 2014 [View article]
    Good article Chuck!

    I view GILD as a great opportunity for gain and invested a significant amount but an amount I could afford if things went wrong. I consider short sellers to be smart money and GILD has lots of shorts.

    Today marks 50% completion of the 3rd quarter. My guess is if I had Hep C I would want Sovaldi and I would want it now. It is the first cure for a major disease in my lifetime and one with 150MM afflicted.

    My instincts tell me that sales are still growing rapidly just by thinking about product life cycles. A recent analyst upgrade to $110 made me suspect the price would rise to about $100. After all people dont buy at $110 to get a $110 value.

    That is not to say that another analyst wont raise his price target to $120 on Monday.

    Good luck fellow GILD investors! Just keep a sense of risk about you.
    Aug 15 08:57 PM | 5 Likes Like |Link to Comment
  • 2 Key Tests For The True Dividend Growth Investor [View article]
    Just to put things in perspective in 2008-9 we experienced a 50-60% drop in the S&P top to bottom. I would add that Dividend investors probably were able to cut that to at most a 40% drop.

    If one had 20% cash, and hunkered down in safer areas of the market by eliminating financials and reinvesting in staples the fall was much less.

    I liked the article because it was a reintroduction to risk. At the same time while I changed my strategy dramatically I stayed invested through 2008-9. To suggest one sit by and watch like a bump on a log is a little silly.

    In 2001-2 I remember buying a tech fund after it had dropped by 50%. I took a little pain on that one as the tech market dropped near 90%. I sure didnt sit by a hold until the bottom after about a 20% loss I sold.

    I also remember the crashes in the 70s, 82, 87, 91-2. Through them all the market has been very very good to me and I retired at 55.

    It is all about managing risk!
    Aug 15 08:36 PM | 1 Like Like |Link to Comment
  • 2 Key Tests For The True Dividend Growth Investor [View article]
    Interesting article!

    It reminds me of an old investor saying What is the definition of a 90% market drop?

    Ans An 80% market drop that just got cut in half again!
    Aug 15 08:12 PM | Likes Like |Link to Comment
  • Dividends Matter If They Matter To You [View article]
    Well written article!

    I recognize that many retired investors need income they can count on and the reduction of risk. What has been argued is really the amount of risk one is willing to take which used to be the Bonds vs Stocks argument. Today it is cloudier as many bonds may be more risky than stocks etc.

    What I have tried to argue in the same Bond vs Stock logic is that all Dividend Payers and even Dividend Champions are not better risk/reward opportunities. Some Dividend Champions have stopped growing or worse and the dividend they offer is really a return of capital at least in part.

    ATT is an excellent example with a 5.2% dividend and history of dividend growth. Yet a look at the financials shows that in the latest 2 fiscal years 2011-13 total stockholder equity dropped by $15 billion. I would submit that T really has been giving closer to a 2%+ dividend and a 3% return of capital.

    To point out that expected growth and thus Total Return has value on SA has been the equivalent at times of advocating Islam vs Christianity.

    I like dividends and would prefer a growing dividend portfolio. At the same time expected total return cannot be ignored for anyone. Over the past few years the retired conservative investor would have been much better off to demand a level of growth if they can afford to give up 1% of dividend income.

    That 1% extra dividend has been costing about 10% in Total Return.

    Right now a good alternative for income investors might be VZ with a 4.3% dividend, fundamental growth in earnings and revenue, a 11 PE. Qualitatively they are widely acknowledged to have the best wireless network and the best Fiber network (FIOS). The internet of things suggests more future users with more devices using more data.

    My return view for VZ is 4.3% dividend + the difference between a more historically normal 13 PE vs the current 11 PE and future growth.
    Aug 15 10:13 AM | Likes Like |Link to Comment
  • The Collapse Of Our Monetary System [View article]
    Respectfully I do not see the collapse of our monetary system and reject the simplistic view offered.

    We will have problems to solve that will look difficult but capitalism will survive. Meanwhile you might want to plan on a long long work life and dependence on the government given your views.

    Perhaps the only thing I can add of value is that you might want to diversify and hold different types of assets. If it should turn out that you are not the next John Maynard Keynes or Milton Friedman you will find it beneficial.
    Aug 14 09:39 AM | 1 Like Like |Link to Comment
COMMENTS STATS
2,209 Comments
2,742 Likes